Adrian Cadbury Committee Report (1992)

Genesis of corporate governance lies in business scams and failures in the late 1980s and the early 1990s Thus Cadbury committee was set up in the UK in May 1991 Committee chaired by Sir Adrian Cadbury was formed by the Financial Reporting Council, the London Stock Exchange, and the accountancy profession to address the financial aspects of Corporate Governance

Adrian Cadbury Committee Report (1992)

Final Report was published on 1st December, 1992. Contents segregated into 3 parts: 1. Reviewing the structure and responsibilities of boards of Directors and recommending a Code of Best Practice

Adrian Cadbury Committee Report (1992)

2. Considering the roles of auditors and addressing a number of recommendations to the accountancy profession: and, 3. Dealing with the rights and responsibilities of shareholders

Adrian Cadbury Committee Report (1992)

Further the code of best practice is divided into 4 sections: 1. Concerning the role of BOD, duties of a board and its composition 2. Dealing with the role of outside nonexecutive directors 3. Concerning executive directors and their remuneration 4. Addressing questions of financial reporting and controls

Adrian Cadbury Committee Report (1992)

Major recommendations defining a code of best practice for companies: 1. All listed companies should comply with the code. The stock exchange should require the Annual Report of all listed companies to include a statement about the extent of compliance. In case of non compliance board to provide reasons.

Major recommendations defining a code of best practice for companies:

2. Favored separation of the offices of chairman and chief executive to prevent excessive concentration of power in boardrooms. 3. Promoted the power and influence of non-executive directors who should be independent and of high calibre.

3.Non-executive directors should be in a majority on the nomination committee which is responsible for making recommendations for board membership to ensure that candidates are judged on their merits and not according to their standing with the chief executive. 4. Companies should set up audit committees whose membership should be confined to non-executive directors.

5. Remuneration committees- mainly non-executive directors- recommend remuneration of executive directors in all its forms. 6. Total emoluments of the chairman and highest paid directors should be disclosed in the companys annual report, including break-up between salary and performance related pay.

7. True & fair financial reportingresponsibility of the board 8. The committee recognized that there exists a conflict of interests between auditors appointed by managers and their responsibility for the interests of shareholders. Thus it calls for a professional and objective relationship between the BOD and the auditors, and also provide the auditors direct access to the nonexecutive directors of the board

9. It called for a professional and objective relationship between the boards and auditors 10. Encouraged institutional investors to make greater use of their voting rights and take active interest in the board functioning.